Amazon's Stock Is Expensive Compared With Apple: Greenberg

No argument on Wall Street can get you more trouble than trying to make the case one company is cheap or expensive relative to another.

Amazon.com

But when you pit Amazon (the expensive one) against Apple (the cheap one), you can’t help but notice the difference.

And it’s a comparison that shouldn’t completely be ignored given that a) both are retailers b) both are manufacturers c) both are leaders in their space that executed against all odds, and d) Amazon is spending serious money trying to steal customers from Apple.

The story is in the chart below.

Apple vs. Amazon

Apple

Amazon

Trailing P/E

14.37

100.20

Forward P/E

10.30

71.43

Price/Book

4.82

13.28

Profit Margin

23.95%

2.58%

Operating Margin

31.22%

3.14%

Return on Assets

22.05%

5.21%

Return on Equity

41.67%

15.24%

Revenue

$108.25B

$40.28B

Total Cash

$25.95B

$6.36B

Levered Free Cash Flow

$19.75B

$1.03B

Source: Yahoo Finance

Among the most profoundly out-of-whack stats: Forward price/earnings multiple (which can also be the most misleading), margins and cash, not to mention return on capital and return on equity.

“Look out five years,” said one money manger I respect. “My guess is that Amazon is a lot bigger, at least double the size in five years. I doubt Apple doubles in that time.”

To which I responded: “Who knows what will happen five years out. Apple will likely slow and Amazon would appear to have a long runway, but margins, returns and all of the stuff that people don’t care about is just so puny at Amazon relative to Apple.”

He: “Agree.”

My take: Amazon gets credit for not playing the beat-the-street game and investing for the future. But if it doesn’t pay off soon those other metrics will start to matter.